Private Lending 101: Everything You Need to Know Before Applying

Navigating the world of private lending can seem daunting for borrowers accustomed to traditional bank financing. Yet understanding the fundamentals of private real estate loans can open doors to opportunities that conventional financing often cannot address. Whether you’re considering private lending for the first time or looking to expand your financing knowledge, this comprehensive guide will equip you with the essential information needed to make informed decisions and successfully secure private financing for your real estate ventures.

Private lending represents a fundamentally different approach to real estate financing than traditional banking. Rather than applying standardized criteria across all borrowers and properties, private lenders evaluate each opportunity on its unique merits, focusing on factors that conventional lenders often overlook. This property-centric approach creates financing possibilities for situations that don’t fit neatly into conventional lending boxes.

What Is Private Lending?

Private lending encompasses a range of non-bank financing options provided by individuals or companies that specialize in real estate-secured loans:

• Direct portfolio lenders like Fidelis Private Fund use their own capital to fund loans, making decisions internally without relying on external approval committees. This direct approach enables faster decisions and greater flexibility than conventional lending institutions.
• Private lending focuses primarily on the property’s value and potential rather than exhaustive borrower documentation. While borrower experience matters, private lenders evaluate opportunities based primarily on the real estate securing the loan—the true determinant of investment security. Fidelis is unique in that most of its clients are repeat borrowers, demonstrating the value Fidelis brings in relation to its focus on relationships as a key factor in whether a loan is approved or not.
• Loan terms typically range from 6 to 36 months, making private lending ideal for short-term financing needs such as property acquisition, renovation, development, or bridge financing until conventional long-term options become available.

When Private Lending Makes Sense

Several scenarios particularly benefit from private lending solutions:

• Time-sensitive opportunities require quick funding that conventional lenders cannot provide. When competitive deals demand closings within days or weeks rather than months, private lending often represents the only viable financing option.
• Properties requiring significant renovation or repositioning often fail to qualify for conventional financing until improvements are complete. Private lenders understand the value-add process and can provide financing based on a property’s potential rather than just its current condition.
• Borrowers with strong real estate experience but credit challenges that disqualify them from conventional financing can often secure private loans based on property fundamentals and exit strategy rather than credit scores alone.

Key Differences from Bank Loans

Understanding how private lending differs from conventional financing helps borrowers set appropriate expectations:

• Higher interest rates reflect the increased flexibility, reduced documentation requirements, and faster funding timelines that private lenders provide. While rates typically exceed conventional financing, the strategic advantages often outweigh the additional cost for short-term needs.
• Shorter loan terms align with the transitional nature of most private lending scenarios. Rather than providing 15-30 year financing like conventional mortgages, private loans typically span 6-24 months, providing time to execute business plans before transitioning to long-term financing.
• Property-focused underwriting emphasizes the asset’s value and potential rather than borrower credit metrics. While conventional lenders might reject loans based solely on borrower credit issues, private lenders can approve financing when property fundamentals remain strong.

What Private Lenders Look For

Private lenders evaluate loan applications based on several key factors:

• Loan-to-value ratio (LTV) represents the loan amount divided by the property’s value, typically ranging from 50-70% for private loans. Lower LTVs reduce lender risk and may qualify for better terms, while higher LTVs might require additional security or higher rates.
• A clear exit strategy outlines how the borrower will repay the loan, whether through the sale of the property, refinancing with conventional lenders, or other means. Well-defined exit plans strengthen loan applications by demonstrating thoughtful planning beyond the initial funding.
• Property condition and location significantly impact private lending decisions, as these factors directly affect both current value and future marketability. Strong locations with favorable market trends typically qualify for better terms than properties in declining areas.

The Fidelis Private Fund Approach

Fidelis Private Fund has developed a borrower-friendly approach to private lending that emphasizes clarity, efficiency, and the importance of relationships in evaluating a request:

• We provide transparent terms without hidden fees or complicated structures, ensuring borrowers fully understand their financing costs and obligations. This straightforward approach eliminates the confusion that sometimes accompanies private lending transactions.
• Our streamlined application process focuses on essential information rather than exhaustive documentation. This efficiency reduces the preparation burden while maintaining appropriate due diligence through thorough evaluation of the property and exit strategy.
• We offer direct access to decision-makers, eliminating the delays and miscommunications that often occur with multiple approval layers. This direct communication ensures questions are answered quickly and commitments are reliable.

Preparing a Successful Application

Borrowers can significantly improve their chances of approval by preparing thoroughly:

• Comprehensive property information including current photos, renovation plans (if applicable), comparable sales, and rental data helps lenders accurately evaluate the opportunity. The more complete this information, the faster and more favorable the lending decision typically becomes.
• Clear project timelines with realistic milestones demonstrate thoughtful planning and execution capability. These schedules help lenders understand how the loan proceeds will be used and when repayment can reasonably be expected.
• Documented experience with similar projects strengthens applications by demonstrating relevant capabilities. While private lenders focus primarily on property fundamentals, borrower experience with comparable projects reduces perceived execution risk.

Common Questions About Private Lending

New borrowers often have several questions about the private lending process:

• Closing timelines typically range from 7-14 days with private lenders, compared to 30-60 days with conventional financing. This accelerated schedule requires prompt document submission and responsive communication throughout the process.
• Documentation requirements vary by lender but typically include property information, purchase contracts, renovation plans (if applicable), and basic borrower information. While less extensive than conventional loan applications, private lending still requires sufficient information to evaluate the opportunity properly.
• Costs beyond interest typically include origination fees (1-3% of the loan amount), appraisal fees, title insurance, and other standard closing costs. Understanding these expenses in advance helps borrowers budget appropriately for their financing needs.

Taking the Next Step

Private lending offers valuable financing solutions for real estate investors and developers facing time constraints, unique property characteristics, or other situations that conventional lenders cannot accommodate. By understanding the fundamentals of private lending, borrowers can determine whether this financing approach aligns with their specific needs and opportunities.

For borrowers considering private financing, preparation and clear communication significantly improve both approval chances and terms. By presenting comprehensive property information, realistic timelines, and well-defined exit strategies, borrowers demonstrate the thoughtful planning that private lenders value.

If you’re considering private financing for your next real estate venture, contact Fidelis Private Fund today at 760-258-4486 to discuss your specific situation and explore how our lending solutions might address your needs. Our team specializes in providing clear, efficient financing for opportunities that conventional lenders often overlook.

If you’re ready to trade landlord headaches for lender discipline and pursue truly passive, asset‑backed yields, call Fidelis Private Fund at 760‑258‑4486. Let’s explore how their proven approach can fit within your portfolio, elevate your income sleeve, and give you back the time and peace of mind you deserve.